A company reports the following beginning inventory and two purchases for the month of January. On January 26, the company sells 290 units. Ending inventory at January 31 totals 130 units. Units Unit Cost Beginning inventory on January 1 Purchase on January 9 Purchase on January 25 260 $ 2.40 60 2.60 100 2.74 Required: Assume the perpetual inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on LIFO
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![### Inventory Cost Analysis: LIFO Method
A company reports the following beginning inventory and two purchases for the month of January. On January 26, the company sells 290 units. Ending inventory at January 31 totals 130 units.
| Inventory Type | Units | Unit Cost |
|------------------------------------|-------|-----------|
| Beginning inventory on January 1 | 260 | $2.40 |
| Purchase on January 9 | 60 | $2.60 |
| Purchase on January 25 | 100 | $2.74 |
**Required:**
Assume the perpetual inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on LIFO (Last-In, First-Out).
### Detailed Explanation of Inventory Cost Allocations
By using the LIFO method, the most recently acquired units are considered to be sold first. Here's how to break down the computation:
1. **Calculate Units Sold:**
- Total units sold = 290 units
2. **Cost Layers (based on LIFO):**
- Last purchase: 100 units at $2.74 each
- Next recent purchase: 60 units at $2.60 each
3. **Units and Cost Breakdown:**
- Units sold from last purchase: 100 units at $2.74 = $274.00
- Including next recent purchase: 60 units at $2.60 = $156.00
- Remaining needed from beginning inventory: 130 units at $2.40 = $312.00
Total cost of units sold:
\[
100 \times 2.74 + 60 \times 2.60 + 130 \times 2.40 = \$742.00
\]
4. **Remaining Inventory (ending inventory):**
- From beginning inventory: 130 units remain
Total cost of ending inventory:
\[
130 \times 2.40 = \$312.00
\]
In summary, the total costs assigned to the ending inventory using LIFO for this period are $312.00.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc87ddbd0-2e96-4ff2-b892-078e8a47d877%2F82b33439-32aa-4a9a-82b5-16a5fdf2647e%2F3s4x9_processed.png&w=3840&q=75)
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